View full sizeAssociated Press photoA pair of traders work on the floor of the New York Stock Exchange Monday.
NEW YORK – Stocks mostly fell Monday but ended off their lows as investors moved into technology and health care shares.
News of Dell Inc.’s plans to buy information technology company Perot Systems Corp. for $3.9 billion helped to lift some tech stocks but failed to raise the broader market. A stronger dollar ignited a sharp sell-off in commodities like oil and gold, which weighed on energy and material shares.
Stocks and commodities have been on a relentless ascent over the past six months as investors make bets that the economy is healing, bolstered by improving activity in the housing and manufacturing industries and better consumer sentiment.
With stocks up more than 50 percent since bottoming in early March, analysts say breaks in the rally are healthy.
“This is what should happen, needs to happen, is going to happen along the way but it doesn’t mean we’re headed down significantly from here,” said Jordan Smyth, managing director at Edgemoor Investment Advisors in Bethesda, Md.
Meanwhile, a private sector group’s forecast of economic activity on Monday further validated Federal Reserve Chairman Ben Bernanke’s pronouncement last week that the U.S. recession was “likely over” from a technical standpoint. The Conference Board’s index of leading economic indicators increased 0.6 percent in August, just shy of the 0.7 percent increase economists expected. It was the fifth straight month the index rose.
According to preliminary calculations, the Dow Jones industrial average fell 41.34, or 0.4 percent, to 9,778.86, after earlier falling as much as 95 points.
The broader Standard & Poor’s 500 index fell 3.64, or 0.3 percent, to 1,064.66, while the tech-heavy Nasdaq composite index rose 5.18, or 0.2 percent, to 2,138.04.
About two stocks fell for every one that rose on the New York Stock Exchange, where volume came to 1.2 billion shares compared with 2.3 billion Friday. Volume was heavy last week because of the expiration of options contracts on Friday.
The dollar rose against other major currencies, sending prices for gold, oil and other commodities tumbling. Commodities are priced in dollars, so a stronger greenback makes them less appealing for foreign investors.
Oil prices dropped $2.33 to settle at $69.71 a barrel on the New York Mercantile Exchange, driving energy stocks lower. Sunoco Inc. lost 65 cents, or 2.3 percent, to $27.79.
Bond prices were mixed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.48 percent from 3.46 percent late Friday.
Trading on Monday reflected a shift out of risky assets that have benefited from the stock market’s advance and into safe plays like the dollar and government bonds. Investors are taking some money off the table ahead of several key government meetings this week, including the Federal Reserve’s two-day rate-setting meeting that begins Tuesday.
As long as there are no bad surprises this week, analysts expect the market to continue to move higher.
“Right now there is not a whole lot to change the overall direction of the market, except for some profit taking,” said Dan Cook, senior market analyst at IG Markets Inc. in Chicago.
The Fed this week is widely expected to keep interest rates at a record low of near zero, but the market will be looking for any indication of when the Fed plans to actually raise rates, a tactic it would use to ward off inflation.
The Fed has kept interest rates low to help stimulate the economy, but if the central bank signals inflation is becoming a concern, that could spook investors. Up until now, the Fed has insisted that inflation, which would further erode the value of the dollar and eat into Treasury yields, is largely in check.
On Thursday, President Barack H. Obama is scheduled to host the Group of 20 economic summit in Pittsburgh.
Analysts say investors are waiting for more clarity following the meetings before they make more bets on the market.
Shares of Perot Systems shot up 65 percent, or $11.65, to $29.56 after Dell offered to buy the company for $30 a share in cash – a 68 percent premium over the stock’s Friday closing price. Dell slid 68 cents, or 4.1 percent, to $16.01.
Homebuilder Lennar Corp. reported a wider loss in its fiscal third quarter as it wrote down the value of unsold homes. Customer orders were down 8 percent year-over-year, but the number of new orders increased each month during the quarter, Lennar said. The stock fell 52 cents, or 3.1 percent, to $16.02.
In other trading, the Russell 2000 index of smaller companies fell 1.91, or 0.3 percent, to 615.97.
Overseas, Hong Kong’s Hang Seng index lost 0.7 percent. A number of other Asian markets, including Japan’s, were closed for holidays. Britain’s FTSE 100 fell 0.7 percent, Germany’s DAX index dropped 0.6 percent, and France’s CAC-40 fell 0.4 percent.